PEER COMPANIES

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PEER COMPANIES

Edelweiss Financial Services has a buy call on Dewan Housing Finance Corporation (DHFL) with a target price of Rs 277.

The current market price of Dewan Housing Finance Corporation is Rs 219.15.

Time period given by the brokerage is one year when Dewan Housing Finance Corporation price can reach the defined target.

Investment rationale by the brokerage:Q2FY19 growth intact, but bumpy ride ahead: Disbursements rose 39 per cent YoY to Rs 137bn, leading to >38 per cent YoY growth in AUM. Within segments, growth was largely driven by LAP (up 69 per cent YoY, 22 per cent of the book) and project loans (up 57 per cent YoY, 17 per cent of the book) with home loan growth at 23 per cent. Current liquidity tightness and systemic risk aversion have led to a meaningful drop in disbursements over the past two months and the company intends to lower its project finance proportion to 5 per cent (17 per cent currently). This will entail AUM growth moderating to low single digit (from 38 per cent YoY).

Funding profile: Challenges likely to persist: While DHFL has been using down-sell route efficiently—sold net pool of Rs 74.1bn to various banks and FIs over the past 50 days—we believe, incremental funding (availability and cost) will pose challenge for DHFL, which will reflect in softer growth and lower NIM.

Outlook and valuations - Reset in earnings; maintain ‘BUY’: Current challenges are likely to significantly reset DHFL’s near-term growth and NIM, rendering earnings vulnerable. Incremental comfort flows from the opening of financing avenues, the strategy of aggressive sell-down to enhance liquidity and divestment of non-core investments. Given that it’s trading at 0.8x FY20E book, we maintain ‘BUY/SP’.

Disclaimer: This recommendation is analyst's own and does not represent those of economictimes.com & ETMarkets.com. Please consult your financial advisor before taking any position in the stock/s mentioned.